From prices and machines to citizens and communities: making climate action more effective

Climate action is often seen as a two-dimensional challenge involving prices and machines. This is particularly the case for environmental economists such recent Nobel laureate, Professor William Nordhaus. For them, the climate problem arises because we trade carbon at too low a price (generally zero). This in turn leads to the second major challenge: machines that depend on carbon are more cost-effective at producing (and using) energy compared to those that do not. If the price issue is addressed, they argue, the problem of machines will take care of itself—low-carbon technologies will immediately be more competitive because fossil fuels are more expensive; but they would also attract more investment over time, driving down costs and further increasing their competitiveness.

And if we charge the perfect price for carbon (equal to the damage it causes, which economists call the social cost of carbon), emissions will be reduced to the optimal level, and nature and the economy will come into perfect harmony.

But this paradigm elides an important third dimension—people. Individuals must act to fix the price problem: you need governments to legislate, you need citizens to care enough, but you also need local communities to accept the legitimacy of new industries and the decline of old ones. Without citizen support, higher carbon prices will be politically infeasible, high-carbon industries will be protected by various means (even when they are costlier), and numerous barriers will obstruct low-carbon solutions.

Survey data suggests that majorities of citizens around the world care about climate change, but they seldom seem to care enough to accept a carbon tax. For example, in 2016 Washington State failed to approve a carbon tax proposal by referendum (but a new proposal is on the ballot in November 2018), and last week the Irish Government failed to deliver a well-flagged but modest increase to its own carbon tax. Very few countries have managed to introduce a carbon tax at rate high enough to drive anything more than the slightest change in behaviour.

I am not against carbon taxes—in fact I (and others) have proposed design solutions to help sell carbon taxes to sceptical electorates and sceptical lobby groups. But focusing on carbon taxes alone is itself part of the problem, because it ignores or downplays other barriers to climate action. When these are considered, different policy approaches and solutions make more sense.

One key challenge (among many) is that the costs of climate action often fall on citizens and communities in rural areas that are dependent on carbon-based industries, from coal miners in Appalachia or the Ruhr valley, to beef farmers in Brazil or Ireland, to the workers in Alberta’s tar sands. Needless to add, these anxieties can be exploited by corporate entities who profit from continued fossil fuel extraction, including some of the most powerful companies in the world. From this perspective, therefore, the costs of low-carbon transition fall disproportionally on geographically focused and highly mobilised cohorts, who tend to form vocal, well-funded and highly effective lobby groups. By contrast, there are few lobbies for the low-carbon industries of the future, which exist only in nascent form or not at all.

Many rural communities, quite simply, associate climate action with a threat to their way of life. This is a shame, because low-carbon technologies could form the economic backbone of these communities for generations to come, long after their fossil fuels are gone, and without the attendant local health and environmental downsides. Climate action requires us to harness the raw materials that are abundant in these communities: sunlight, water, biomass, land and wind. Furthermore, the technologies themselves are small-scale, modular, highly reliable and the energy generation process is relatively straightforward, making them a perfect fit for citizen investors.

Should these points not form the basis for climate communication, and the narrative around low-carbon transition? Perhaps, but communication alone means little. It is essential for these communities to see tangible benefits from low-carbon transition, preferably jingling around in their pockets, if we are to counterbalance the narrative of threat to traditional industries. Finding ways to promote local investment in distributed renewables is part of the solution.

There is a wide range of research which identifies multiple benefits to communities from investing in renewables locally. Put simply, local investment in distributed renewables invests communities in the idea of climate action and engenders support for low-carbon transition more generally, while creating local economic benefits (some of this research is summarised on this Renewable and Sustainable Energy Reviews paper, drafted with UCC colleagues).

Given this coincidence of factors, one might expect that local citizens and community groups would be central players in low-carbon transition—and this is the case in some countries. In a second paper published in Local Economy, UCC colleagues and I found that over half of total investment in distributed renewables in Denmark and Germany had come from local citizens and community groups. We also found that the experiences of these leading countries had inspired other jurisdictions such as the UK (Scotland in particular) and the Canadian State of Ontario to introduce incentives to mobilise local investments, with considerable success.

However, it remains unclear to what extent the lessons and policy approaches of leading countries such as Denmark and Germany can be applied where there is less of a citizen investment tradition. For example, in Spain, Ireland and many parts of the US, investment in renewables has been widespread, but it has been dominated by large-scale developers.

In a paper published last week in Energy Research and Social Science, we therefore examined, using a fancy survey method (conjoint analysis), if there was an interest in investing in distributed renewables in a country (Ireland) with no citizen investment tradition and only one community-owned renewable project among hundreds.

We found a very high level of interest in investing in distributed renewable projects, especially among somewhat wealthier citizens with some investment experience. They liked investment opportunities that had a high return (obviously) and many were also highly risk-averse. They also liked solar PV more than wind, both of which were preferred to biomass-based technologies. However, they only wished to invest modest amounts, and we concluded that full community ownership would only be possible for very small wind projects and small and medium-sized solar projects. To promote fully community-owned projects, we identified the importance of addressing high early (feasibility and development ) stage project risks and barriers. Investing in developer-led renewable energy projects also emerged as a model of engagement.

My participation in this three-year project has now come to an end. Overall, citizens want to invest, but they require support from governments, particularly at the earlier and riskier stages of project development. Non-recourse loans and grants, but also advice and technical support from trusted intermediaries will all be necessary, while supporting “lighthouse” projects is also essential to illustrate what is possible on the ground. We also saw from our case studies, particularly in places like Ontario, that turning the model of low-carbon transition around and putting citizens at its core is a slow process. It requires consistent policy focus over time.

But it is worth it—effective climate action must consider not only prices and machines, but also people and communities.

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